Thanks to the political uncertainty surrounding SEZs, at least one global investor is having second thoughts.
FE has learnt that Blackstone Group has decided to opt out of its investment commitments in more than one SEZ project in north India. Other private equity (PE) firms are also believed to be adopting a wait- and-watch approach.
The cold feet developed by PE firms comes as a result of delays by the UPA government on taking a final call on tax breaks and land acquisition for these projects. SEZs are expected to provide a haven for various industries to operate without being stifled by restrictive labour laws.
Blackstone was at an advanced stage of discussions with Reliance Industries for its mega SEZs, including two in Haryana, for which the PE firm was expected to chip in about $500 million. The group is also learnt to be in discussions with DLF and the Raheja group for similar projects in Haryana, worth about $250 million and $150 million, respectively.
Neither Blackstone nor DLF offered any comments in response to e-mails and telephone calls from FE. However, a source close to Blackstone said, ?The company is presently not keen on SEZs and was not working at it. However, there may have been discussions on some projects.?
Since SEZ developments are deemed real estate projects by the banking sector (thus severely restricting them from funding such zones), developers are forced to look for alternate sources of investment such as private equity or public issues. In the absence of crucial PE investment, however, the feasibility of several SEZ projects grows increasingly doubtful.